Didier Darcet
4 June 2021

The Equation of Willingness

Behind the decomposition of assets’ returns in alphas and betas lies an equation of willingness, and a conceptual mistake. It hides the fact that economic growth per capita originates in innovation (Schumpeter) or optimization (Ricardo), with different outcomes. The mistake could misguide companies and economies to over-optimize their production systems, increase their fragility, and eventually, collapse.